Banks see ‘some growth’ in corporate loans

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Published: October 4, 2019 2:53:45 AM

The government had directed public-sector banks (PSBs) to hold loan outreach programmes in 400 districts ahead of Diwali festivities to stimulate loan growth.

corporate loans, Indian banking industry, retail loans disbursement, Loan Melas, public sector banks, RBI data, non food credit growthAccording to the latest RBI data, non-food credit growth slid to 9.9% as of August 30, against 12.2% a year ago.

Coming as a major relief for the Indian banking industry, lenders are witnessing “some growth” in corporate loans after facing a lull period. For retail loans disbursement this festive season, banks expect a good loan offtake during the ongoing ‘Loan Melas’, customer outreach initiatives. Bankers told FE lenders got good response from customers on Thursday, the first day of the programme. Some lenders will continue the programme on Friday. During the event, banks saw demands for passenger car loans, but not for commercial vehicle loans. Response for home loans was good, they said.

The government had directed public-sector banks (PSBs) to hold loan outreach programmes in 400 districts ahead of Diwali festivities to stimulate loan growth. According to the latest RBI data, non-food credit growth slid to 9.9% as of August 30, against 12.2% a year ago.

“We have seen some growth. In terms of quality of growth, it is to be seen, but nevertheless, we have seen some growth,” Dinesh Kumar Khara, MD, State Bank of India, told FE. According to Khara, it’s too early to say whether these are big-ticket corporate loans. “One is loan sanctioned and second is the growth,” he pointed out. “We are quite hopeful that for corporate loan we will have growth, and more so when the relief has been given in terms of corporate income tax,” he added.

Banks have been expecting that after the last month’s cut in corporate taxes, companies’ incentive to invest would go up. In the first two quarters of FY20, while there was a negative growth in corporate loan, growth was mainly driven by retail credit. Private sector investment was largely muted in the last 12-18 months.

PV Bharathi, MD and CEO, Corporation Bank, said, “Mid-corporates have started approaching us for credit facilities. It is a very recent development.” She expects this ‘sentiment’ to improve over time in the corporate loan segment.
“Corporates are depending on loan requirements for exports. They say this is the season they are trying to get some textile orders because of the US-China problem. So, we expect some pick up on that side. We expect by the end of October, we should see some credit offtakes growing,” Bharathi said.

Speaking to FE, Uco Bank’s MD and CEO Atul Kumar Goel said demands for corporate loans picked up after the tax cut announcement. State-run Allahabad Bank, which organised customer outreach initiatives in different districts of Bihar and Uttar Pradesh, said the customer response was very good on the first day. Executive director K Ramachandran said the bank saw demand for passenger car loans, but there was none for commercial vehicle loans. Following the good response, Allahabad Bank will continue the programme on Friday for some places.

“We expect retail loan growth to pick up. We are going on with the outreach programme. We are encouraged by the housing and MSME sectors,” said Bharathi. “Personal and housing loan applications have started coming in,” she said. Ashok Kumar Pradhan, MD and CEO, United Bank of India, said compared with last year, this year’s festive season retail loan growth has been muted. So far, there has not been a good demand for housing loans as many projects not being sold.

SBI’s Khara, however, said it was too early to really read the trends. “May be we will have to wait and watch for more time then only we can know the trends. Because early signals are not the trends,” Khara explained, adding customer outreach programmes would provide some “better results”.

“If you really look at it, people just get into the borrowing spree when they reach the situation that they will have to buy. And that buying is only during the festivals only. May be in another 15-20 days, we could look at some early indicators. I hope that things will certainly look up,” he added.

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